How Banks Qualify Borrowers for Home Loans

The factors are:

  • Down Payment
  • Income
  • Credit Rating
  • Cash Reserves

The bank wants to know you have the down payment.  They will measure income against obligations, such as you car payment, credit card balances etc.  Credit scores are reviewed.  Cash reserves are how much money (how many monthly payments) will you have in the bank after closing?

For those who excel in all categories, the job is easy; find the loan with the lowest rate and closing costs.

For those less than perfect, find a mortgage professional.  He can assess your strengths and weaknesses, clear up credit and advise you on how to bolster your position.  He will recommend an affordable price range.  And he will get you Loan Preapproval, the first step.  This lets sellers know you are serious and in the same position as a cash buyer.